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A 2 percent increase in the price of milk causes a 4 percent reduction in the quantity demanded of chocolate syrup. what is the cross-price elasticity of demand for chocolate syrup with respect to the price of milk?

Verified Answer :

the cross-price of elasticity of demand for chocolate syrup with respect to the price of milk would be :

e = % ΔQ chocolate syrup / %ΔP of milk

e = -4% / 2%

e = -2 %

ashishdwivedilVT

The cross-price elasticity of demand for chocolate syrup with respect to the price of milk is -2

It is given that

Increase in the price of milk = 2%

Reduction in demand for chocolate syrup = 4%

What is cross-price elasticity?

Cross-price elasticity is the ratio of percentage change in quantity demanded and percentage change in price.

The cross-price elasticity of given problem = \(\frac{-4}{2} = -2\)

Therefore, the cross-price elasticity of demand for chocolate syrup with respect to the price of milk is -2.

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